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It’s true, and AJ Strata’s figures prove it — only a small part of the stimulus funds have actually been spent so far, very few jobs have actually been saved or created, and a whole lot of Americans are in a whole lot of pain.

What worries me about it is the nagging feeling that this is all part of the plan and the stimulus package wasn’t supposed to do any stimulating just yet.

Remember the story about Joseph Stalin? How he plucked the feathers from a live chicken, fed it, and then showed his comrades how it followed him about the room? He told them, “That’s how you get the people to follow you. You make them feel pain, then you feed them.”

Right now, I think we are in the plucking phase. The feeding phase will come next year when the stimulus funds actually do start to flow.

What will we do then? Will we follow the One around like hungry chickens? Will we surrender our liberties in exchange for a handful of corn? Will we complacently stand by with bellies once again full and allow America to become the next socialist workers’ paradise?

Somebody please show me where I’m wrong, ’cause if I’m right, it scares the soup out of me.

SADIE

Set up: I read an article online today (cannot find the link) but had cut and pasted it to send to my son, along with some personal comments (most have been edited, including a few comments at the end of the article which had nothing to do with the content. My apologies for the very long piece, but I strongly recommend the read.

Dear ( ),

After doing just a little reading, it is ever so apparent to me, that the rise in stocks/housing/and all that glitters since 1993-4 was a 15-year run on false and misleading numbers on every level. A bubble that instead of being punctured by pin prick to ease the explosion was hit with an economic missile. The added elements to all of this are of course, September 11, 2001 and its aftermath on every level. As I evaluate it, we are stuck with 2009 cost of living and debts with pre 1993-4 actual real dollar value/worth. Throw into the mix; out sourcing of American jobs since the 70’s, union demands, non-stop congressional pork projects, malfeasance of the highest order and you can begin to understand the immense problem that young, middle age and old will have to live with.

I am sharing this with you because I think it’s important that our reality checks don’t bounce.

It was not a lesson Lawrence Summers mastered with great ease. But after nearly a decade working beside sphinxlike Alan Greenspan, and having watched his own tenure as president of Harvard cut short by a phrase that slipped too nimbly from brain to mouth, Summers, director of the President’s National Economic Council, has become a restrained public man. Gone are the days when he would glibly compare flailing financial markets to jet crashes, as he did to TIME in 1999. He is mindful of how ill-considered asides by policymakers can cause financial-market angina. So you can probably imagine the ripple that ran through the Peterson Institute for International Economics in Washington in July when Summers looked up from his prepared speech, flashed a grin and loosed the sort of utterance that once upon a time marked imminent indiscretion. “There was,” he told the room, “a fight about whether I was allowed to say this now that I work in the White House.” (See how Americans are spending now.)

What Summers proceeded to offer was, in fact, an unusually candid insight. And though couched in jargon, it was an insider’s confession of why our present economic moment is fraught with both danger and opportunity. There appears to be, Summers told the suddenly very attentive crowd, a strange bit of physics working itself out in our economy. The problem is related to a hiccup in an economic rule called Okun’s law. First mooted by economist Arthur Okun in 1962, the law (it’s really more of a rule of thumb) says that when the economy grows, it produces jobs at a predictable rate, and when it shrinks, it sheds them at a similarly regular pace. It’s a labor version of how the accelerator on your car works: add gas, go faster; less gas, go slower.

What made Summers’ frank comment important is that it suggests this just-add-gas relationship may now be malfunctioning. The American economy has been shedding jobs much, much faster than Okun’s law predicts. According to that rough rule, we should be at about 8.5% unemployment today, not slipping toward 10%. Something new and possibly strange seems to be happening in this recession. Something unpredicted by the experts. “I don’t think,” Summers told the Peterson Institute crowd – deviating again from his text – “that anyone fully understands this phenomenon.” And that raises some worrying questions. Will creating jobs be that much slower too? Will double-digit unemployment persist even after we emerge from this recession? Has the idea of full employment rather suddenly become antiquated? Is there something fundamentally broken in the heart of our economy? And if so, how can we fix it?

The Labor Conundrum
The speed of America’s now historic employment contraction reflects how puzzling this economic slide has been. Recall that the crisis has included assurances from the chairman of the Federal Reserve that it was over when in fact it was just getting started and a confession from a former Fed chairman that much of what he thought was true for decades now appears to be wrong. Nowhere is this bafflement clearer than in the area of employment.

When compiling the “worst case” for stress-testing American banks last winter, policymakers figured the most chilling scenario for unemployment in 2009 was 8.9% – a figure we breezed past in May. From December 2007 to August 2009, the economy jettisoned nearly 7 million jobs, according to the Bureau of Labor Statistics. That’s a 5% decrease in the total number of jobs, a drop that hasn’t occurred since the end of World War II. The number of long-term unemployed, people who have been out of work for more than 27 weeks, was the highest since the BLS began recording the number in 1948. Jobless figures released Sept. 4 showed a 9.7% unemployment rate, pushing the U.S. – unthinkably – ahead of Europe, with 9.5%.

America now faces the direst employment landscape since the Depression. It’s troubling not simply for its sheer scale but also because the labor market, shaped by globalization and technology and financial meltdown, may be fundamentally different from anything we’ve seen before. And if the result is that we’re stuck with persistent 9%-to-11% unemployment for a while – a range whose mathematical congruence with that other 9/11 is impossible to miss – we may be looking at a problem that will define the first term of Barack Obama’s presidency the way the original 9/11 defined George W. Bush’s. Like that 9/11, this one demands a careful refiguring of some of the most basic tenets of national policy. And just as the shock of Sept. 11 prompted long-overdue (and still not cemented) reforms in intelligence and defense, the jobs crisis will force us to examine a climate that has been deteriorating for years. The total number of nonfarm jobs in the U.S. economy is about the same now – roughly 131 million – as it was in 1999. And the Federal Reserve is predicting moderate growth at best. That means more than a decade without real employment expansion.

We’re a long way from Hoovervilles, of course. But it’s not hard to imagine, if we’re not careful, a country sprouting listless Obamavilles: idled workers minivanning aimlessly through overleveraged cul-de-sacs with no way to pay their mortgages, no health care, little hope of meaningful work and only the hot comfort of angry politics.

This is why the problem of how America works needs to become the focus of an urgent national debate. The jobs crisis offers an opportunity to think in profound ways about how and why we work, about what makes employment satisfying, about the jobs Americans can and should do best. But the ideas Washington has delivered so far are insufficient. They reflect a pre–9%-11% way of thinking as much as old defense policy reflected a pre-9/11 notion of who our enemies were. The funding for job creation in the American Recovery and Reinvestment Act was based on an assumed 8.9% unemployment rate. Now 15% is a realistic possibility. And yet we’re hearing few interesting ideas about how to enhance America’s already groaning unemployment support system as millions of Americans sit idle. Tangled in the debate over health care – and bleeding political capital – the White House may find itself too weak and distracted to deal with the danger of joblessness.

We can’t afford to wait. The longer someone is unemployed, the harder it is to get back to work, a fact as true for the nation as it is for you and me. As the Peterson Institute’s Jacob Kirkegaard explains, “It is entirely possible that what started as a cyclical rise in unemployment could end up as an entrenched problem.” Past crises have illustrated that lesson: the longer you wait, the harder it is to contain. This is as true for joblessness as it was for subprime mortgages, al-Qaeda and computer viruses.

Right Man, Right Time
By one of those strange Sully Sullenberger collisions of preparation and crisis – the sort that put Depression expert Ben Bernanke in at the Fed at the moment of a flameout of 1930s magnitude – Larry Summers made his reputation as an employment theorist. Summers is the nephew of two Nobel economists and was regarded as the smartest undergrad anyone knew, but as he surveyed his research options 30 years ago, he settled on the then relatively unsexy specialty of labor. The subject tickled his sense of skepticism. “The view that was taking hold at that time, a view that unemployment wasn’t a terribly serious problem, was importantly wrong,” Summers says. “I thought if you could have areas where there was long-term substantial unemployment, then that raised some questions about the functioning of markets.” In essence, Summers saw in unemployment a chance to explore how markets don’t work – and to think about policies that could correct for the failures. Perfect training for 2009.

Many of the ideas Summers developed were codified in a 1986 article titled “Hysteresis and the European Unemployment Problem.” Even today it’s a piece he’s proud of: “Ah, yeah, the hysteresis article,” he interjects when it’s mentioned. Hysteresis is a word that you (and the rest of us) should hope we don’t hear too much of in the coming months. It comes from the Greek husteros, which means late. It refers to what happens when something snaps in such a way that it can never be put back together. Bend a plastic ruler too far, drop that lightbulb – that cracking sound you hear is the marker of hysteresis. There’s no way to restore what has just been smashed.
The idea that hysteresis happens to economies is one that economists don’t like to think about. They prefer to consider economies as yo-yos tethered to the sturdy string of the business cycle, moving up and down from growth to slowdown and back. But from time to time, things do snap. And Summers’ argument in 1986 was that unemployment in Europe, the sort that might persist in the face of growth, was an expression of an economy that had snapped. Europe’s economy was hit not only by shocks like an oil-price spike, a productivity collapse and rocketing tax rates but also by stubborn unions that made hiring, firing and adjusting payrolls near impossible.

Hysteresis, Summers explained, could come from all sorts of shocks like this. And that may be what is playing out in the U.S. If you look at the three great job busts of the past 100 years – the 1930s, the early 1980s and today – you find an important difference. The Reagan recession ended with workers returning to jobs that were the same as or similar to the ones they had lost. But 1930s joblessness was structural. The jobs people lost – largely in agriculture – never came back. Workers had to move to the industrial sector, a transition helped by the demands of a war. It was massive national hysteresis. Sound familiar? “A lot of the jobs that have been lost will never come back,” the Peterson Institute’s Kirkegaard says. Which means that hiccup in Okun’s law is a warning: growth alone won’t employ America again.

Cash for Clunker Careers
What to do? If your goal is to create jobs, you have two choices – and one painful fact – to confront. The painful fact is that the 1930s option, to have the government directly employ millions of people in labor fronts, is not an option today. “There’s no way to create real jobs using this approach,” says Harvard professor Roberto Mangabeira Unger. In the 1930s, you could throw 10,000 people with shovels at dam or road projects. Today the work of 10,000 shovels is done by a few machines – and it was a lot easier to persuade farmers to switch to ditchdigging than it would be to get laid-off hedge-fund traders to switch to sewer repair, appealing as such an idea might be.

So if the government can’t hire everyone, where will jobs come from? One option would be to rely on traditional strategies: if we create demand through growth, cheap money and massive government spending, then some jobs will return. In the meantime, train people for whatever work they can get – fast food, nursing, you name it. But if we’re in a posthysteresis world, then just adding gas to the economy won’t be enough, and making cheap low-end jobs won’t deliver a workforce capable of sustaining competitive growth. “There’s no use making economic change if you don’t have human agents who can take advantage of it,” Unger explains.

The alternative would involve reshaping what it means to work in America. Such a plan would start by changing what it means to be jobless. To begin with, this would require a massive increase in job retraining, one that assured that every laid-off worker had a chance to learn a new skill and years of funding to master it – instead of the six-month shots now generally offered. The Administration’s proposal to increase funding to community colleges is a start. But it’s only a start. Ideally, the White House needs to propose an omnibus employment-emergency bill that guarantees jobless workers a basic set of rights for two to three years: health care, access to retraining, subsidized mentoring for careers in high-end manufacturing or health services. Handled well, such a program could be a “cash for clunker careers.” Obama should also bring together innovative minds in technology and service – the people who run consumer-driven businesses like Disney and Google – to find ways to make the process of being unemployed less of a bureaucratic and emotional mess.

But we’ve also got to take a careful look at how jobs are created – and what sorts of jobs Americans want to do. The most likely sources of job growth in the next few years are going to be confined to health care, education and restaurant/hospitality services. But we can’t nurse, teach and barista our way to real national power. Service jobs alone can’t support growth and innovation – which will be essential as we struggle to pay off a historic national debt and fund the retirement of the baby boomers. So in addition to a retraining push, a sensible set of policies would shift the landscape of job creation. It would transfer money out of Wall Street and into community lending to encourage the formation of new companies. It would create local business pods in which neighbors ask, What do we do well here, and how can we do it better? Some of the world’s most skilled machinists live in the American Midwest. But their skills are geared to a dying auto industry, and with no bank credit for start-ups and no way to organize, they have no chance to transform themselves into a workforce for globally competitive precision-manufacturing firms.

Is there really a demand for machinists? Yes – even in a recession. One rough calculation found that about a million high-skilled jobs remain unfilled. This is why a fresh approach to job-making, one that focuses on mastery of skills instead of simple button-pushing, matters. “If we go back to the old ways,” says sociologist Richard Sennett, who has probably studied the quality of American working life as thoroughly as any other scholar in the past few decades, “we just go back to a very unsustainable path.”

The President’s advisers grasp the urgency of the task. “Would I like Americans to be more skilled?” Summers muses. “Yes. Would I like to be able to increase skill faster than is likely to be possible? Sure. Would I like a larger fraction of good entrepreneurial ideas to happen in the U.S.? Of course. There are millions of people who need work.” But Summers need only read his own research to recall that traditional government policies are not going to pull us out of the job trap.

Ramo is managing director of Kissinger Associates and author of The Age of the Unthinkable

SADIE

This is the link. It took me 30 minutes to play detective.
Again, apologies for the long cut and paste.

It is very easy to “create jobs.” You can pay people to dig holes and fill them up again. Or make automatic elevators illegal and re-employ the 500,000 people who once had jobs as elevator operators. Or buy up *all* used cars in the country (why stop at clunkers) and thereby create a lot of “good manufacturing jobs.” The possibilities are endless.

The trick is creating jobs that contribute to economic output in a way that covers their own costs, or better. And Obama’s policies are making this very, very difficult. The Democratic war on energy (especially electricity) together with continued wilding by plaintiff-side lawyers will greatly inhibit productive business activity, as will the dysfunctionality of the public schools and the refusal to enable meaningful competition to these bureaucratic nightmares.

If you were a young person from (say) India, with an electrical engineering degree in hand and about to get your MBA, interested in starting a business, wouldn’t the Obama/Pelosi/Reid policies give you a strong reason to go back and do it in India?

SADIE

/snip/
WASHINGTON – President Barack Obama says he’ll be held responsible for any problems once a health care overhaul becomes law, so he has every reason to get it right.

FAILURE HAS NO CONSEQUENCES FOR ANYONE IN D.C.

“I have no interest in having a bill get passed that fails. That doesn’t work,” he told CBS’ “60 Minutes” in an interview to air Sunday night.

Heading to a rally Saturday in Minneapolis, the president used his weekly radio and Internet address to focus on government figures showing that nearly half of all Americans live without health insurance in a 10-year period. He said the situation will worsen without the changes he wants and that losing coverage can happen to anyone.

HAPPEN TO ANYONE? … DOES THAT INCLUDE … NEVERMIND, QUESTION ASKED AND ANSWERED.

“I intend to be president for a while and once this bill passes, I own it. And if people look and say, You know what? This hasn’t reduced my costs. My premiums are still going up 25 percent, insurance companies are still jerking me around.’ I’m the one who’s going to be held responsible. So I have every incentive to get this right,” he said in an excerpt of the CBS interview released Saturday.

AND IF IT’S WRONG, WILL HE WRITE A PERSONAL CHECK AND WITH WHO’S MONEY? ONCE, THIS BILL PASSES, I OWN IT. REALLY!!! WELL, BUT ALL MEANS, WRITE THE REFORM SO THAT EVERYONE OWNS IT – EVERYONE FROM THE TOP DOWN.

Tiresias

The Ramos article in “Time” that Sadie gives us seems to me to spotlight some keys. They may be more intuitive than anything else, but they seem to raise valid questions.

But 1930s joblessness was structural. The jobs people lost – largely in agriculture – never came back.

“Structural.” Those jobs were (are) forever gone.

In the 1930s, you could throw 10,000 people with shovels at dam or road projects. Today the work of 10,000 shovels is done by a few machines…

Is this not also structural? Those jobs are forever gone, too.

In this country today you could add to the “dam and road projects” examples practically any industrial job, from building cars to building aircraft carriers. Fewer people, more machines. We have furthermore spent the last couple of decades shipping industrial jobs overseas, so there are fewer of them to begin with.

So the position becomes: we have the largest population we have ever had, with more people in the labor pool and job market than we have ever had – and there is progressively less and less and less for them to do.

Think about it for a moment. It used to take 30 people in a Ford plant to assemble a car; now it’s 3 people and a bunch of robots. What are those other 27 people finding to do with themselves? A company that used to need 15 accountants now manages with one computer ace – and he’s probably more productive than the 15 were. So – what are the displaced 14 doing? Railroads used to employ hundreds of people in big marshalling yards – now it’s 2 guys with direct connect phones and a couple of wrenches and screwdrivers: the brakes are penumatic tubes, switches are thrown electrically from a distance, and trains are assembled by automation. Big corporations used to have hundreds of people just to answer the phones, now it’s a recording of a girl with a pleasant voice – who made the recording while sitting in a studio a thousand miles away from the place you’re calling. How long can this go on?

Ramos says the solution is to retrain these people. To do what? He offers the idea of taking the money away from Wall Street and putting it into local communities to start new companies. Again – to do what? What do local communities need new companies for? Most local communities pretty much already get what they need. The entrepreneurs spotted those local needs a couple of generations ago and have been pretty much engaged in fulfilling them ever since. Most communities are already served by phone companies, have internet access, satellite TV, schools, supermarkets, clothing stores, tax preparers, banks, too many lawyers, plumbing supply outlets, landscapers, computers, etc. (And most local communities don’t want an automobile plant, steel mill, aircraft factory, or refrigerator factory in their back yard.)

Ramos is of the opinion that we need a million high-skilled workers, even in the recession. Looking at the industrial landscape I wonder for what – but great! That leaves us with only 20 million jobs to fill.

A few years ago I asked Robert Rubin the question: does it all grow forever? I suspect he didn’t take it seriously, as his answer was to grin and say: “boy – it better!” I wonder if it does. What was a full-employment economy for 160 million, or 200 million people – how’s that looking when you’re at 300 million? 300 million with fewer jobs available because you’ve spent decades to build machines precisely for the purpose of eliminating workers?

I wonder if you reach a point where you have all the people you need to do all the jobs you need done. Right now, in the midst of this serious recession, the supermarket’s stocked. There’s gas in the tanks at the gas stations. New tires are plentiful. The power’s on. The phones work. The doctor will see you. The trains and buses are running. I call a plumber or electrician – they show up. The bridge over the canal closed for repairs for a month – it’s fixed and open again. DirecTV is sending me 3 new boxes. Citibank, Bank of America, Fidelity and Franklin persist. The John C. Stennis came home from deployment a couple of weeks ago, F/A-18s zip around overhead (pretty high, thank goodness) just like always.

So all the jobs I need done are getting done. What about you?Which means, do we, personally, miss those who are now unemployed? Do we even notice they’re gone? In other words: did we really need them?

I have no answers. And it’s apparent that Greenspan, Bernanke, Rubin, Geithner, et al don’t either.

“So all the jobs I need done are getting done. What about you?”…well, around here, there are a lot of potholes that need filling. A *lot*.

SADIE

I have no answers. And it’s apparent that Greenspan, Bernanke, Rubin, Geithner, et al don’t either.

Nor Ramos, which leaves the $64,000 question (adjust for inflation) that has not been addressed – What if there is always an unemployment rate of 10%-15% and how long can an economy sustain that level.

The irony of it all is that the 3 people and bunch of robots (I really like that) never lowered the cost of purchasing a car and in fact – escalated the costs. Higher profits, fewer employees plus the joint ventures of American and the Japanese car markets. It may be that the globalization of industry and outsourcing jobs to Third World economies weakened forever the American economy. Everything in life has a price on it – financial, emotional, spiritual. Seems like we are paying the dues on all three.

Back in the 50’s the price of a television was $300-$500. When they stopped making them in the US and were imported, prices dropped like a stone. Of course, we all got to buy TV’s and all other matter of things (clothing, cars, electric or battery operated this n’ that) BUT at what cost. We had stopped shopping using the actual and real value of the dollar internally and were now buying ‘stuff’ on the wages earned elsewhere – a total economic disconnect and 50 years later an economic disaster.

Have you needed to hire a painter lately. A friend of mine did. Just two small bedrooms and a small hallway, woodwork, doors, the usual. Three days of work, one man and $1600 in labor and material. I was stunned, but then realized, this painter probably didn’t know when the next ‘job’ was coming and it may have been his only job for that month – the real cost of using real dollars between the two of them.

Final thought (maybe). Back in the early 70’s inflation began to spin out of control. The cost of homes were doubling every few years. I had thought then that the dollar should have be devalued by 10% (even in spite of selling my home at the time at double what I had paid for it 7 years earlier and it doubled again two years after I sold it). I knew then that the Feds would never do it, appearances, you know.

We may have to continue to settle for less overall and become more of what we were at the beginning of the last century – minimalists.

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